11th District Cost of Funds -
A monthly cost-of-funds index (COFI)
reflecting the weighted-average interest
rate paid by 11th Federal Home Loan
Bank District savings institutions for
savings and checking accounts. The 11th
district covers Arizona, California
and Nevada. The index is published on
the last day of the month and reflects
the cost of funds for the prior month.

A

Acquisition cost -
Under an FHA loan, the purchase price
or appraised value of the property plus
the estimated closing costs.

Adjustable
Rate Mortgage (ARM) -
A mortgage in which the interest rate
is adjusted periodically based on an
index. Also called a variable rate mortgage.

Adjustment
Interval -
For an adjustable rate mortgage, the
time between changes in the interest
rate charged. The most common adjustment
intervals are one, three or five years.

Adjusted book basis -
The purchase price of a property plus
any capital improvements less accrued
depreciation, if any, to the date of
the sale.

Amortization -
Literally to "kill off" (root:
mort) the outstanding balance
of a loan by making equal payments
on a regular schedule (usually
monthly). The payments are structured
so that the borrower pays both
interest and
principal with each equal payment.

Annual
Percentage Rate (APR) -
A figure that states the total
yearly cost of a mortgage as
expressed by the actual rate
of interest paid. The APR includes
the base interest rate, points,
and any other add-on loan fees
and costs. As a result the APR
is invariably higher for the
rate of interest that the lender
quotes for the mortgage but
gives a more accurate picture
of the likely cost of the loan.
Keep in mind, however, that
most mortgages are not held
for their full 15 or 30 year
terms, so the effective annual
percentage rate is higher than
the quoted APR because the points
and loan fees are spread out
over fewer years.

Annuity -
A series of income payments
of receipts over a period of
years.

Application Fee -
The fee charged by the lender
to the borrower for applying
for a loan. Payment of this
fee does not guarantee that
a loan will be approved. Some
lenders may apply the cost of
the application fee to certain
closing costs.

Appraisal -
The determination of property
value based on recent sales
information of similar properties.

Assessment -
Determining a property's value
for the purpose of taxation.

Assumable Loan -
These loans may be passed on
from a seller of a home to the
buyer. The buyer "assumes" all
outstanding payments.

Assumption -
Buying property and assuming
the responsibility of the exiting
mortgage.

Appreciation -
Increases in property value
due to fluctuations in the market,
inflation, et al.

Assumable Mortgage
-
A mortgage that provides for
a buyer to "assume" all outstanding
payments when a home is sold.
The buyer usually must meet
qualification standards to assume
a loan.

B

Balloon Mortgage -
Behaves like a fixed-rate mortgage
for a set number of years (usually
five or seven) and then must
be paid off in full in a single
"balloon" payment. Balloon loans
are popular with those expecting
to sell or refinance their property
within a definite period of
time.

Balloon Payment
-
The final lump sum that is paid
at the end of the balloon mortgage.

Bankruptcy -
A tactic that individuals use
to relieve themselves of debts
and/or liabilities when they
are no longer able to repay.
The most common form of individual
bankruptcy is a Chapter 7, when
an individual frees himself
from most of his/her debts.
Borrowers who have undergone
bankruptcy usually cannot qualify
for "A" paper loans until after
two years after declaration
and a re-establishment of credit.

Best Faith Estimate
-
An estimate of the total costs
for securing a real estate loan,
that is given to borrowers prior
to closing.

Bill of Sale -
A written document that transfers
a to personal property.

Biweekly Mortgage
-
Mortgage loan payments that
requires a payment twice monthly,
yielding thirteen payments per
year instead of twelve. This
significantly reduces the time
a principal is paid off.

Blanket Mortgage
-
A mortgage secured by the pledging
of more than one property or
collateral.

Book Value -
Acquisition costs less any accrued
depreciation.

Broker -
An individual in the business
of assisting in arranging funding
or negotiating contracts for
a client but who does not loan
the money himself. Brokers usually
charge a fee or receive a commission
for their services.

Budget Mortgage
-
A mortgage that includes a portion
for taxes and insurance as well
as principal and interest.

Buy down -
Allows loans to be made at less-than-market
interest rates by paying front-end
discounts. The interest rate
is brought down for a temporary
period, usually from one to
three years. In order to acquire
this discount, a lump sum is
paid and held in an account
used to supplement the borrower's
monthly payment. After the discount
period, the payment is calculated
as the note rate.

C

Callable Debt -
A debt security in where the
issuer has the right to redeem
the security at a specified
price on or after a specified
date, but prior to its stated
final maturity date.

Caps
-
A set percentage amount by which
an adjustable rate mortgage
may adjust each adjustment period.
For adjustable loans, caps are
usually quoted as two numbers
as in 2/6. The first number
indicates how much a loan may
adjust at each adjustment period
while the second number indicates
how much a loan may adjust over
its lifetime.
Loans like the 3/1 and 5/1 adjustable
which have an initial fixed
period are quoted with 3 numbers
as in 3/2/6 which would mean
that the first adjustment may
be as much as 3%, subsequent
adjustments are capped at 2%
each, and the lifetime cap is
6%.Two-Step loans are quoted
with a single cap, which is
the amount by which the loan
may adjust at its single
adjustment date.

Carry back Loan
-
A loan in which a seller agrees
to finance a buyer in order
to complete a property sale.

Certificate of Eligibility
-
A veteran's evidence of entitlement
for a VA-guaranteed loan.

Certificate
of Reasonable Value (CRV) -
An appraisal that has been performed
on a property that is being
paid for a VA loan. After the
property has been appraised,
the Veterans Administration
issues a CRV.

Clear -
A that is free of liens or any
legal question as to the ownership
of the property.

Closing -
Final arrangements to transfer
of property as well as allocate
charges and credits.

Closing Costs -
Closing costs are fees paid
by the borrower when a property
is purchased or refinanced.
Costs incurred include a loan
origination fee, discount points,
appraisal fee, search, insurance,
survey, taxes, deed recording
fee, and credit report charges.
All closing costs are separated
into "non-recurring," and "pre-paid."
Non-recurring charges are any
items that are paid only once
because a loan was obtained
or a property bought, such as
a loan origination fee. Pre-paid
charges are those that recur
over time, like insurance and
property taxes. These are summarized
in the Good Faith Estimate.

Cloud -
An outstanding claim or encumbrance,
that, if valid, would affect
or impair the owner's property
title.

Collateral -
Property, real or personal,
pledged as a security to back
up a promise. In a home loan,
the property is considered collateral
that can be revoked if loan
is not repaid according to the
terms of the mortgage or deed
of trust.

Commitment -
A written letter of agreement
detailing the terms and conditions
by which the lender will lend
and the borrower will borrow
funds to finance a home.

Conforming Loan -
Same as a conventional loan
below.

Construction Loan -
A short term loan for funding
the cost of construction. The
lender advances funds to the
builder as the work progresses.

Conventional Mortgage
-
A mortgage loan that will readily
be bought by Fannie Mae or Freddie
Mac. A mortgage loan that
is obtained without any additional
guarantees for repayment, such
as FHA insurance, VA guarantees,
or private insurance.
There is a loan limit of $729,750,
but varies across the nation
depending upon neighborhood.
Conventional loans carry a lower
interest rate and less fees
at origination. These
loans are usually given at an
80% loan-to-value ratio, 20%
down.

Conversion -
The right of a borrower to convert
an adjustable or balloon loan
into a fixed loan. The options
are... "Not Available," "Must
Re-qualify," and "Auto-qualify."

Credit Loan -
A credit loan is a mortgage
that is issued on only the financial
strength of a borrower, without
great regard for collateral.

Credit-Loss Ratio
-
The ratio of credit-related
losses to the dollar amount
of MBS outstanding and total
mortgages owned by the corporation.

Credit Rating -
Borrowers are rated by lenders
according to the borrower's
credit-worthiness or risk profile.
Credit ratings are expressed
as letter grades such as A-,
B, or C+. These ratings are
based on various factors such
as a borrower's payment history,
foreclosures, bankruptcies and
charge-offs. There is no exact
science to rating a borrower's
credit, and different lenders
may assign different grades
to the same borrower.

Credit Report -
A report to a prospective lender
on the credit standing of a
prospective borrower. Used to
help determine creditworthiness.
Information regarding late payments,
defaults, or bankruptcies will
appear here.

Deposit -
A lump sum given in advance
as security. A deposit's always
paid of a larger amount to be
paid in the future. In mortgage
and real estate terms, this
is called the "earnest money
deposit."

Depreciation -
In real estate and mortgage
terms, the decline in the property
value.

Discount -
Difference between the face
amount of a note or mortgage
and the price at which the instrument
is sold in the secondary market.

Discount Points
-
A term used in government subsidized
loans, such as FHA and VA loans.
Refers to any "points" (one
percent of the loan amount)
paid in addition to the one
percent loan origination fee.

Down
Payment -
Money paid by a buyer from his
own funds, as opposed to that
portion of the purchase price
which is financed.

E

Earnest Money Deposit
-
A deposit made by a potential
home buyer to show that they
are serious about purchasing
the property.

Easement -
Giving other persons, other
than the owner, access to a
property.

Eminent Domain -
The government right to take
private property for public
use depended on the payment
of its fair market value.

Encumbrance -
Any lien against a property
or any restriction it its use,
such as an easement; a right
or interest in a property held
by one who is not the legal
owner.

Equal
Credit Opportunity Act (ECOA)
-
The act declaring the elimination
of discrimination on the basis
of age, sex, and race in finance.

Equity -
The difference between the current
market value of a property and
the principal balance of all
outstanding loans.

Escalator Clause
-
A clause in a loan providing
for increases in payments or
interest based on pre-determined
schedules or on a specific economic
index, such as the consumer
price index.

Escrow -
A third party agent that receives,
holds, and/or disburses certain
funds or documents upon the
performance of certain conditions.
For example, an earnest money
deposit's put into escrow until
the transaction is closed. Only
then can the seller receive
the deposit.

Escrow Account (impound
account) -
An account that a borrower can
hold with a lender once a purchase
transaction is closed. This
requires borrowers to pay more
than the principal and interest
each month. The overage is put
into escrow, which the lender
uses to pay items like property
taxes and home owner's insurance
when they are due. This eliminates
the actual number of payments
that a home owner has to worry
about, but not the amount that
has to actually be paid.

Escrow Analysis
-
An analysis performed by a lender
each year to escrow account
holders to ensure that the correct
amount of money is being collected
to cover anticipated payments.

Escrow Fee -
These costs cover the preparation
and transmission of all home
purchased-related documents
and funds. Escrow fees range
from several hundred to over
a thousand dollars, based on
the purchase price of your home.
Not all states require funds
to be put into escrow accounts
for closing.

Estate -
The ownership interest an individual
holds in real property. This
is also the sum total of all
the real property and personal
property owned by an individual
at time of death.

Eviction -
The legal removal of real property
occupants for unlawful actions
carried out by those occupants.

F

Fair Credit Reporting
Act -
A law that protects consumer
that regulates the reporting
of consumer credit by agencies
and establishes procedures for
correcting errors on an individual
record.

Fannie
Mae (FNMA) -
The Federal National Mortgage
Association is a congressionally
chartered, shareholder-owned
company. This organization is
the nation's largest supplier
of home mortgage funds.

Fannie Mae's Community
Home Buyer's Program -
A program that offers flexible
underwriting guidelines to subsidize
a low- to moderate-income family's
purchase of a home. The program
usually decreases the total
amount of cash needed to purchase
a home.

Federal
Housing Administration (FHA)
-
An agency under the U.S. Department
of Housing and Urban Development
(HUD), it insures loans made
by approved lenders to qualified
borrowers, in accordance with
its regulations.

Fees
-
Up-front costs associated with
a loan. Clicking on the word
VIEW shown under the "Fees Detail"
column on the quotes results
page will display detailed information
about the financial institution's
fees and requirements pertaining
to that rate.

Fee Simple -
The best that one can obtain;
unqualified and conveys the
highest bundle of rights.

FHA Loan -
A government-backed mortgage
loan supported by the US FHA
and the Department of Housing
and Urban Development (HUD).

Finance Charge -
The total dollar amount your
loan will cost you. It includes
all interest payments for the
life of the loan, any interest
paid at closing, your origination
fee and any other charges paid
to the lender and/or broker.
Appraisal, credit report and
search fees are not included
in the finance charge calculation.

Firm Commitment
-
A lender's agreement to provide
a loan to a specific borrower
on a specific property.

First Mortgage -
A mortgage that has priority
over other mortgages.

Fixed-Rate Mortgage -
A mortgage where the interest
rate does not change for the
life of the loan.

Float -
Between the time of application
and closing, a borrower may
choose to bet on interest rates
decreasing by electing to float.
Floating is essentially choosing
not to lock the interest rate.
Since it's the borrower's responsibility
to lock his or her rate before
(or at) closing, choosing to
float is considered risky and
may result in a higher interest
rate. Request information from
your lender regarding lock procedures.

Forbearance -
The postponement for a limited
time of a portion or all the
payments on a loan when a borrower
is delinquent.

Foreclosure -
A legal procedure in which real
estate is sold by the lender
to pay a defaulting borrower's
debt .

397(k)/403(b) -
An investment plan sponsored
by employers that allows individuals
to set aside tax-deferred income
for retirement or emergency
purposes. A 397(k) applies to
private corporations, while
a 403(b) applies to non-profit
organizations.

397(k)/403(b) loan
-
A loan that can be taken against
the amount accumulated in the
397(k)/403(b) plans, if so allowed
by the plan administrator. Loans
against these plans are an acceptable
source of down payment for most
types of other loans.

G

Good
Faith Estimate -
An estimate of charges which
a borrower is likely to incur
in connection with a loan closing.

Government National
Mortgage Association (Ginny
Mae) -
Provides funds for government
loans and takes over special
assistance and liquidation functions
of Fannie Mae.

Grace Period -
A time allowed, usually 15 days,
for making late payments without
a penalty.

grantee -
The person to whom an interest
in real property is conveyed.

grantor -
The person conveying an interest
in real property.

Gross Monthly Income -
The total amount the borrower
earns per month, not counting
any taxes or expenses. Often
used in calculations to determine
whether a borrower qualifies
for a particular loan.

H

Hard-Money Mortgage
-
Cash loan to a borrower.

Hazard Insurance -
A form of insurance in which
the insurance company protects
the insured from certain losses,
such as fire, vandalism, storms
and certain other natural causes.

Home
Equity Conversion Mortgage (HECM)
-
Also known as the reverse annuity
mortgage. This mortgage provides
that instead of making payments
to a lender, the lender makes
payments to the individual.
Older home owners are able to
convert home equity into cash
this way, in the form of monthly
payments. Borrowers don't qualify
on the basis of income, but
on the value of his or her home.
Such a loan does not have to
be repaid until the borrower
no longer occupies the property.

home equity line
of credit -
A mortgage loan in second position
that allows a borrower to obtain
cash drawn against home equity,
up to a certain amount.

Home Inspection
-
A thorough assessment by a professional
regarding the structural and
mechanical condition of a property.

home owner's insurance
-
An insurance policy that combines
personal liability insurance
and hazard insurance for a home
and its contents.

home owner's warranty
-
An insurance policy that is
purchased by a buyer that covers
certain repairs, should they
be necessary over a certain
period.

Housing Ratio -
The ratio of the monthly housing
payment to total gross monthly
income. Also called Payment-to-Income
Ratio or Front-End Ratio.

Hybrid Financing
-
The joining together of two
forms of finance, such as combining
a convertible loan with a participation
loan, under which the lender
has the right at loan maturity
to convert the debt to a 50
percent ownership in the property.

Index -
A published interest rate against
which lenders measure the difference
between the current interest
rate on an adjustable rate mortgage
and that earned by other investments
(such as one- three-, and five-year
U.S. Treasury Security yields,
the monthly average interest
rate on loans closed by savings
and loan institutions, and the
monthly average Costs-of-Funds
incurred by savings and loans),
which is then used to adjust
the interest rate on an adjustable
mortgage up or down.

J

Judicial Foreclosure
-
A court procedure used by lenders
to secure clear to a property
under a defaulted real estate
loan.

Jumbo Loan -
A type of non-conventional loan
for more than $729,750 or more
in the continental United States
(some states are lower). These
limits are set by the Federal
National Mortgage Association
and the Federal Home Loan Mortgage
Corporation. Because jumbo
loans cannot be funded by these
two agencies, they usually carry
a higher interest rate and higher
fees.

L

Last
Updated -
The Last Update column on a
quotes results table tells you
when the information was last
provided by the lender to our
site. We always place new listings
at the top of each table so
that you, the borrower, may
have immediate access to the
most timely information. Times
provided are all Eastern Standard
Time.

lease -
A written agreement between
a property owner and a tenant
that stipulates the payment
and conditions under which the
tenant may possess the real
estate for a specified period
of time.

Leasehold Estate
-
An estate for a fixed length
of time, established when a
landlord gives up possession
of real estate to a tenant,
giving the tenant an equitable
interest in the property, as
defined by lease terms.

Lease Option -
A rental agreement indicating
a tenant's option to purchase
a property. Monthly payments
consists not only of rent, but
an overage that can be applied
towards a down payment on an
already established amount.

Lender -
The bank, mortgage company,
or mortgage broker offering
the loan. Many institutions
only "originate" loans and then
resell the obligation to third
parties.

Leverage -
Using someone else's money for
the purchase of property.

Liability Insurance
-
Insurance that protects property
owners against claims that alleges
negligence or inappropriate
action that resulted in bodily
injury or property damage to
another party.

LIBOR -
The London InterBank Offered
Rate Index (LIBOR) is an average
of the interest rates that major
international banks charge each
other to borrow U.S. dollars
in the London money market.
Like the U.S. treasury the CD
indexes, LIBOR tends to move
and adjust quite rapidly to
changes in interest rates.

Lien
-
A legal claim by one party against
the property of another as security
for a debt. Must be paid off
when property is sold. A mortgage
or a first trust deed is a lien.

Life
of Loan Cap -
The maximum interest rate that
can be charged during the life
of the loan. Also called Lifetime
Cap. This value is often expressed
as an increment above the initial
loan rate. For example, an adjustable
rate loan with an initial rate
of 7.25% and a 6% lifetime cap
will never adjust above a rate
of 14.50% (7.25+6.0).

Loan
-
The principal, or amount of
total borrowed money, that is
repaid with interest.

Loan Amount -
The amount of money that you
intend on borrowing from a financial
institution for the purchase
of your home. Subtracting the
down payment from the purchase
price of the home will provide
you with the loan amount.

Loan Servicing -
A service performed by a lender
to protect a mortgage investment,
including collecting monthly
payments from borrowers and
dealing with delinquencies.

Loan-To-Value Ratio
-
The relationship between the
amount of the mortgage loan
and the appraised value of the
property expressed as a percentage.
A LTV ratio of 90 means that
a borrower is borrowing 90%
of the value of the property
and paying 10% as a down payment.
For purchases, the value of
the property is assumed to be
the purchase price, for refinances
the value is determined by an
appraisal.

Lock
noun -
The period, expressed in days,
during which a lender will guarantee
a rate. Some lenders will lock
rates at the time of application
while others will allow the
borrower to lock the rate after
the application is taken. Request
information from your lender
regarding lock procedures.

Lock verb -
The act of committing to a mortgage
rate. This action, taken by
a borrower some time between
the application and the closing
dates, is sometimes accompanied
by a payment by the borrower
to the lender.

Lock-in Clause -
Clause in a loan agreement that
states that the borrower cannot
repay a loan prior to a specified
date.

M

Margin -
The amount a lender adds to
the quoted index rate for an
adjustable rate loan to determine
the new interest rate.

Maturity -
The "Due Date" of a loan.

Merged Credit Report
-
A credit report that reports
data from two or more major
credit repositories.

Minimum
Credit -
This field on the table refers
to the minimum
credit ratinga borrower
must have in order to qualify
for the listed loan.

Modification -
Any change to the original terms
of a mortgage.

Monthly Housing Expense
-
Total principal, interest, taxes,
and insurance paid by the borrower
on a monthly basis. Used with
gross income to determine affordability.

Mortgage -
A legal document that pledges
property to a creditor for the
repayment of the loan, and is
the term used to describe the
loan itself. Some states use
the term First Trust Deeds to
refer to mortgage loans.

Mortgagee -
The lender in a mortgage agreement.

Mortgage Banker
-
A financial intermediary that
originates or funds loans, collects
payments, inspects the property,
and forecloses if necessary.
The main difference between
a mortgage banker and a loan
officer is a banker funds their
own loans and sell them on the
secondary market, usually to
Fannie Mae, Freddie Mac, or
Ginny Mae.

Mortgage Broker
-
A mortgage company that originates
loans, joining the borrower
and lender for a real estate
loan, earning a placement fee.

Mortgage Constant
-
The factor used for rapid computation
of the annual payment needed
to amortize a loan.

Mortgage Insurance
-
Insurance that covers the lender
against losses incurred as a
result of a default on a home
loan. This is usually required
on all loans that have a loan-to-value
higher than eighty percent.
Mortgages that have an 80% LTV
that don't require mortgage
insurance have higher interest
rates. The lenders then pay
the mortgage insurance themselves.
In addition, FHA loans and some
first-time home buyer programs
require mortgage insurance regardless
of the loan-to-value.

Mortgagor -
The borrower in a mortgage agreement.

Multi-dwelling Units
-
Properties that provide separate
housing units for more than
one family, although only a
single mortgage is secured.

N

Negative Amortization
-
Essentially occurs when a borrower
makes a minimum payment that
may not cover the interest that
is due. Loan balance then increases
as a result.

Net
Effective Income -
Gross income less federal income
tax.

No Cash-out Refinance
-
A refinance transaction that
is not intended to put cash
in the hand of the borrower,
but instead calculates a new
balance to cover the balance
due on a current loan and any
costs with obtaining a new mortgage.

No-Cost Loan -
A no-cost loan can either be:
1) a loan that has no "lender
costs" associated with it or,
2) a loan that also covers purchases
or refinancing costs, which
may be incurred in buying a
home, obtaining and/or refinancing
a loan, but are not directly
charged by the lender. The interest
rate on this Your Type Of Loan
is higher.

Non-Conventional
Mortgage -
A mortgage loan that is just
the opposite of a conventional
loan. Understanding
a conventional loan is to understand
a non-conventional loan.
Government-backed loans.
Loans greater than the national
limit of $729,750 (less in some
areas) are non-conventional.
The borrower puts down less
than 20%. Fannie Mae and
Freddie Mac will not buy non-conventional
mortgages. Interest Rates
are higher. Points
at closing are higher.
Fees are often higher.
Junk fees are often included.

Note
-
A legal document that obligates
a borrower to repay a mortgage
loan at a stated interest rate
during a specified period of
time.

Note Rate -
The stated interest rate on
a mortgage note.

O

Origination Fee -
The fee imposed by a lender
to cover certain processing
expenses in connection with
making a loan. Usually a percentage
of the amount loaned.

Owner Financing
-
A property purchase that is
partly or wholly financed by
the seller.

Owner's Policy -
A policy protecting the buyer
for the amount of the purchase
price in the event of a future
dispute.

P

Package Mortgage
-
A mortgage that /includes equipment
and appliances located on the
premises in addition to the
real property itself.

Partial Entitlement
-
Under VA loans, the amount of
guarantee still available to
an eligible veteran who has
used his previous entitlement.

partial payment
-
A payment that is not sufficient
enough to cover the month payment.
During times of economic hardship,
a borrower can make this request
of the loan servicing collection
department.

Participation Financing
-
A loan in which more than one
mortgagee or more than one mortgagor
harbors an interest. It can
also be a loan in which the
mortgagee receives partial ownership
of the property being financed.

Payment Change Date
-
The date when a new monthly
payment amount takes effect
on an adjustable rate mortgage
(ARM) or a graduated payment
mortgage (GPM). The payment
change date occurs the month
immediately after the interest
rate adjustment date.

Periodic Payment
Cap -
The limit on the amount that
payments can increase or decrease
during any one adjustment period
for an adjustable-rate mortgage
(ARM) where the interest rate
and principal fluctuate independently
of one another.

Periodic Rate Cap
-
The limit on the amount that
payments can increase or decrease
during any one adjustment period
in an ARM (adjustable rate mortgage),
regardless of how high or low
the index fluctuates.

Personal Property
-
Movable property that does not
fit the definition of realty.

Phone -
The table list the correct telephone
numbers to access the loan department
of each institution.

PITI
-
PITI stands for principal, interest,
taxes, and insurance. An "impounded"
loan means that the monthly
payment covers all of these,
and perhaps mortgage insurance,
if your loan so calls for it.
If one does not have an "impounded"
account, then the lender still
calculates these amounts separately
and uses it as part of determining
one's debt-to-income ratio.

PITI Reserves -
A cash amount that a borrower
must have on hand after making
a down payment and paying all
closing costs for the purchase
of a home. The PITI (principal,
interest, taxes, and insurance)
must equal the amount that the
borrower would have to pay for
PITI for a determined number
of months.

Planned
Unit Development (PUD) -
A type of ownership where individuals
actually own the building or
unit they reside in, but shared
areas are owned jointly with
the other members of the development
or established association.

Pledge
Account Mortgage (PAM) -
Combines GPM (graduated payment
mortgage) with a subsidizing
savings account to provide the
borrower with a low payment
plan, the lender with amortizing
payments and the seller with
cash.

Points -
The site allows lenders to post
rates via point ranges. Points
are broken out on the site for
Discount and Origination. The
definitions for each are as
follows:

Discount Points=Interest
Charges paid up-front when
a borrower closes a loan.
A point is equal to 1 percent
of the loan amount (e.g.
1.5 points on a $100,000
mortgage would cost the
borrower $1,500). Generally,
by paying more points at
closing, the borrower reduces
the interest rate of his
loan and thus future monthly
payments.

Origination Points=A
fee imposed by a lender
to cover certain processing
expenses in connection with
making a real estate loan.
Usually a percentage of
the amount loaned, such
as one percent.

Pre-Approval -
A term used to mean that a borrower
has completed a loan application
and provided debt, income, and
savings information that has
been reviewed and pre-approved
by an underwriter.

Pre-Foreclosure
Sale -
A procedure in which the borrower
is allowed to sell his or her
property for an amount less
that what is owed on it to avoid
foreclosure, fully satisfying
the borrower's debt.

Pre-paid's -
Expenses such as taxes, insurance,
and assessments, which are paid
in advance of their due date,
and on a prorated basis at closing.

Pre-Payment -
Any amount paid so as to reduce
the principal before the due
date.

Prepayment Penalty -
Lenders who impose prepayment
penalties will charge borrowers
a fee if they wish to repay
part or all of their loan in
advance of the regular schedule.

Pre-Qualification
-
After a loan officer has made
inquiries about a borrower's
debt, income, and savings, he
or she can write a written statement
(pre-qualification) about the
borrower's chances for qualifying
for a home loan.

Principal -
The amount of debt, not counting
interest, left on a loan.

Private Mortgage Insurance
(PMI) -
Paid by a borrower to protect
the lender in case of default.
PMI is typically charged to
the borrower when the Loan-to-Value
Ratio is greater than 80%.

Proration's -
The allocation of charges and
credits to the appropriate parties
at a real estate sale and/or
loan closing at a real-estate
sale and/or loan closing.

Promissory Note
-
A written promise to repay a
specified amount over a specified
period of time.

Purchase Agreement
-
A written contract signed by
the buyer and seller stating
the terms and conditions under
which a property will be sold.

Purchase-Money Mortgage
-
Mortgage given by a borrower
to the seller as part of the
purchase price of the property.

Purchase-Money Transaction
-
The acquisition of property
through the payment of money
or its equivalent.

Q

Qualifying Ratio -
The ratio of the borrower's
fixed monthly expenses to his
gross monthly income. Ratios
are expressed as two numbers
like 28/36 where 28 would be
the Front-End Ratio
and 36 would be the Back-End
Ratio.

The Front-End Ratio is the
percentage of a borrower's
gross monthly income (before
income taxes) that would
cover the cost of PITI (Mortgage
Principal
Payment + Mortgage
Interest
Payment + Property
Taxes +
home owners Insurance).
In the case of a 28% Front-End
Ratio a borrower could qualify
if the proposed monthly
PITI payments were 28% or
less than the borrower's
gross monthly income.

The Back-End Ratio is the
percentage of a borrower's
gross monthly income that
would cover the cost of
PITI plus any other
monthly debt payments like
car or personal loans and
credit card debt.

Quitclaim Deed -
A deed that transfers, without
warranty, whatever interest
or a grantor may have at the
time the conveyance is made.

R

Rate Lock -
A commitment issued by a lender
to a borrower or other mortgage
originator guaranteeing a specified
interest rate for a specified
period of time at a specific
cost.

Real Estate -
A portion of the earth's surface
extending downward to the center
to the earth and upward into
space, including all things
permanently attached thereto
by nature or man and all legal
rights therein.

Real Estate Agent
-
A person licensed to negotiate
and transact the sale of real
estate.

Real Estate Settlement Procedures
Act (RESPA) -
An act requiring the revelation
of all costs involved in a real
estate closing to all participants.

Real property -
See real estate.

Realtor -
A real estate agent, broker,
or associate that holds an active
membership in a local real estate
board that is affiliated with
the National Association of
Realtors.

Recast -
To redesign an existing loan
balance into a new loan for
the same period or longer, to
reduce payments and help a distressed
borrower.

Reconciliation -
Determining the final estimate
of value by weighing the results
of the various approaches in
an appraisal.

Re-conveyance Clause
-
The clause in a trust deed that
gives the back to the borrower
when the loan is paid in full.

Regulation Z -
A truth-in-lending provision
that requires lenders to reveal
the actual costs of borrowing.

Refinancing -
The process of paying off one
loan with the proceeds from
a new loan, using the same property
as security.

Rent-Loss Insurance
-
Insurance that protects a landlord
against loss of rent or rental
value due to fire or other casualty,
resulting in the tenant being
excused from paying rent.

Repayment Plan -
An agreement between a lender
and a delinquent borrower regarding
mortgage payments, in which
the borrower agrees to make
additional payments to pay down
past due amounts while still
making scheduled payments.

Residual Qualifying
-
Under a VA loan, using specified
housing expenses to qualify
for a loan payment.

Restrictions -
Rules imposed on the use of
real estate in an effort to
preserve property values.

Reverse
Annuity Mortgage (RAM) -
A system developed for an elderly
property owner in which regular
monthly payments can be received
from a lender. When the total
reaches a pre-determined amount,
the owner begins repaying the
loan or sells the property.

Revolving Debt -
A credit arrangement that allows
a customer to borrow against
a pre-approved line of credit
used to purchase goods and services.
The borrower is responsible
for the actual amount borrowed
plus any interest due.

Right-of-First Refusal
-
A provision that states that
a property to be first offered
to a specific person before
it can be offered for sale or
lease to other parties.

Rollover Loan -
A loan that /includes a call
date earlier than its normal
amortization period.

Rule of 78 -
Calculates proportionate amount
of interest due on a loan being
paid in full before its maturity.

S

Sale-Buyback -
A financing arrangement in which
an investor buys property from
a developer and immediately
sells it back under a long-term
sales agreement, wherein the
investor retains legal title.

Sale-Lease back
-
A financing arrangement whereby
an investor purchases real estate
owned and used by a business
corporation, then leases the
property back to the business.

Secondary Mortgage
Market -
A market where mortgage originators
may sell them, freeing up funds
for continued lending and distributes
mortgage funds nationally from
money-rich to money poor areas.

Second Mortgage
-
A mortgage that has a lien position
subordinate to the first mortgage.

Secured Loan -
A loan that is backed by collateral.

Security -
Something given, deposited,
or pledged to make secure the
fulfillment of an obligation,
usually the repayment of a debt.

Seller Carry-Back
-
An agreement in which the owner
of a property provides financing,
often in combination with an
assumable mortgage.

Senior Loan -
A real estate loan in first
priority position.

Servicer -
An organization that collects
principal and interest payments
from borrowers and manages borrowers'
escrow accounts. The servicer
often services mortgages that
have been purchased by an investor
in the secondary mortgage market.

Servicing -
The collection of mortgage payments
from borrowers and related responsibilities
of a loan servicer.

Settlement Costs -
See Closing Costs.

Sinking Fund -
Monies deposited in advance
in anticipation of satisfying
a debt in the future.

Stop Date -
Date on a term loan when the
balloon payment is due.

Subordinate Financing
-
Any mortgage or other lien that
has a priority lower than that
of the first mortgage, or senior
loan. See second mortgage.

Survey -
A drawing or map the shows the
precise legal boundaries of
a property, the location of
improvements, easements, rights
of way, encroachments, and other
physical features.

Sweat Equity -
Increase in property value due
to improvement by owners.

T

Takeout Mortgage
-
A permanent mortgage, obtained
by pre-arrangement between a
builder and a financial institution,
to repay the interim mortgagee
at the completion of construction.

Tax
Lien -
A claim against real estate
for the amount of its unpaid
taxes.

Third-Party Origination
-
A process by which a lender
uses another party to completely
or partially originate, process,
underwrite, close, fund, or
package the mortgages it plans
to deliver to the secondary
mortgage market.

Title -
A legal document showing a person's
right to or ownership of a property.

Title Company -
A company that specializes in
examining and insuring titles
to real estate.

Title Insurance
-
Insurance policies typically
insure a home buyer against
any title-search errors or mistakes,
and against loss due to disputes
over property ownership. Insurance
can additionally offer protection
to the lender under similar
circumstances. The cost of insurance
is usually a set value per thousand
of dollars of the total loan
amount.

Title Search -
A check of the records to make
sure that the seller is the
actual legal owner of the property,
and that there are no liens
or other claims outstanding.

Total Debt Ratio -
Monthly debt and housing payments
divided by gross monthly income.
Also known as Back-End Ratio.

Transfer of Ownership
-
The means by which the ownership
of a property changes hands.
Examples of such include the
purchase of a property "subject
to" the mortgage, the assumption
of the mortgage debt by the
property purchases, and any
exchange of possession of the
property under a land sales
contract or any other land trust
device.

Transfer Tax -
State or local tax payable when
the passes from one owner to
another.

Truth-in-Lending
Law -
Provision that requires lenders
to reveal the actual costs of
borrowing.

Two-Step Mortgage
-
A loan where the interest rate
is fixed for the first seven
years and then is adjusted one
time for the balance of the
loan period.

V

VA
Loan -
A government-backed mortgage
loan supported by the US Veterans
Administration.

Variable Rate Mortgage
-
See Adjustable Rate Mortgage.

Vested -
Means that one has a right to
use a portion of a fund, such
as an individual's retirement
fund.

Z

Zero Percent Financing
-
A loan with no interest in the
contract. The IRS imputes 10
percent for both borrower and
lender.

Zoning -
The right of a community, under
its police power, to dictate
the use of property within its
boundaries.